Earnings season is like a grand theatrical performance, a stage where investors eagerly await the unveiling of a company’s financial prowess. This week’s lineup is nothing short of spectacular, with heavyweights like Netflix, Bank of America, Goldman Sachs, and UnitedHealth Group poised to take center stage and reveal their quarterly report cards.
Before the red curtains rise on a company’s earnings announcement, the market buzzes with energy akin to a bustling beehive. Implied volatility, the mysterious aura cloaking the outcome of the report, shrouds the stock in uncertainty. Speculators and hedgers engage in a frenzied ballet, driving demand for the company’s options sky-high and spinning the price of options into a dizzying whirl.
Yet, as the curtains fall post-earnings revelation, the once-enigmatic implied volatility gracefully descends back to earth, returning to its normal rhythm.
Peering through the looking glass, investors seek the expected range for these featured stocks. Contemplate the at-the-money put and call options, adding them together from the option chain. It’s a rough estimate, akin to a painter’s brushstroke capturing the essence rather than fine details, but it paints a reasonably accurate picture.
Monday
Goldman Sachs – 3.9%
Schwab – 5.3%
Tuesday
Bank of America – 4.1%
Morgan Stanley – 5.0%
United Airlines – 8.9%
UnitedHealth Group – 4.7%
Johnson & Johnson – 2.9%
PNC Financial – 4.2%
Wednesday
Las Vegas Sands – 5.3%
ASML Holdings – 6.2%
U.S. Bancorp – 5.1%
Abbott Laboratories – 4.1%
Thursday
Taiwan Semiconductor – 6.7%
Netflix – 8.8%
Blackstone – 5.4%
Intuitive Surgical – 6.6%
Friday
Schlumberger – 4.4%
American Express – 5.8%
Procter & Gamble – 3.0%
Like skilled artisans, option traders can craft their trades based on these anticipated moves. Bears may eye selling bear call spreads beyond the projected range, while bulls might consider selling bull put spreads or even delving into the realms of naked puts for those unafraid of risk. Neutral traders, akin to tightrope walkers finding their balance, may find solace in iron condors, keeping their strikes beyond the anticipated territory.
When navigating the treacherous waters of earnings-related options trading, it’s wise to sail with risk-defined strategies and keep position sizes modest. Should unforeseen storms rock the boat and a trade capsizes in a full loss, let its impact be a gentle ripple, no more than 1-3% in the vast sea of your portfolio.
Stocks With High Implied Volatility
Enter Barchart’s Stock Screener, an arena where the hunt for stocks with heightened implied volatility commences. Let filters sift through the market landscape, seeking treasures marked by total call volume exceeding 2,000, market capitalization surpassing 40 billion, and an IV percentile towering above 50%.
A canvas of results unfolds, enriched by IV Percentiles, showcasing a myriad of stocks with volatility standing tall. A glimpse into this world reveals a vast tapestry, too expansive to capture in a single frame.
Last Week’s Earnings Moves
Last week’s stage bore witness to a spectrum of actors, each playing to an audience anticipating their every move:
DAL – 6.3% expected
FAST – 5.2% expected
KMX – 8.6% expected
STZ – 3.8% expected
BLK – 3.6% expected
C – 4.6% expected
JPM – 3.6% expected
PGR – 4.7% expected
WFC – 4.7% expected
Unusual Options Activity
In the mysterious realm of unusual options activity, stocks like Meta, Apple, JPMorgan, Occidental Petroleum, and Bristol-Myers Squibb took center stage last week. An ensemble of other stocks also danced under the spotlight, engaged in strange and captivating movements.
Amidst the excitement, a word of caution lingers in the air, a gentle reminder to tread carefully in the realm of options where fortunes can ebb and flow like the tide. This article stands as a beacon of knowledge, illuminating paths for education, not prescribing trades. Always chart your course wisely, consulting the wisdom of advisors before navigating the stormy seas of investments.